News APP

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  gplay

This article was first published 1 year ago
Home  » Business » 'More than a majority will shift to new tax regime'

'More than a majority will shift to new tax regime'

By Shrimi Choudhary and Asit Ranjan Mishra
February 03, 2023 15:24 IST
Get Rediff News in your Inbox:

'TDS rates are not dependent on which scheme you are in.'
'TDS rates would not be impacted irrespective of the scheme either old or new regime chosen by taxpayers.'

Illustration: Uttam Ghosh/Rediff.com

"Flexibility is there in the scheme where you can switch according to their needs," Revenue Secretary Sanjay Malhotra tells Shrimi Choudhary and Asit Ranjan Mishra/Business Standard.

 

Have you been conservative in your revenue assumption in FY24?

For Budget purposes, it is always better to be realistic. Overall, revenue comprises both direct and indirect taxes pegged at 10.5 per cent growth which is in sync with nominal GDP growth. Also, revenue forgone (due to tweaking in the new tax regime) was not factored in the overall budgetary target.

GST growth is estimated at 12 per cent as we expect the economy to do better domestically. However, keeping excise and customs in mind, we lowered the overall target.

Revenue foregone is actually not factored in. That's decided late and Budget numbers have been frozen earlier. This 35,000 crore (Rs 350 billion) forgone has to be factored in as its not the part of Budget calculation.

Is it because the tweaks to the new tax regime were decided pretty late?

That's how it happens.

Any plans to do away with the old tax regime?

There are no such plans, however, it has been the constant endeavour of the government to make the tax regime simpler and transparent. Exemption free makes things more transparent.

There is a push by the government to move towards exemption free schemes where the effective tax rate is transparent. Same we did in case of corporate taxes and GST.

Hopefully, over the years, the old income tax regime may lose its relevance.

Since the new tax regime becomes the default regime, any impact on tax deducted at source (TDS)?

TDS rates are not dependent on which scheme you are in. TDS rates would not be impacted irrespective of the scheme either old or new regime chosen by the taxpayers.

How many taxpayers do you expect to shift to the new tax regime?

Conservatively speaking, more than a majority will shift to the new regime -- which is more than 50 per cent.

What gives you this confidence?

I believe the modified scheme is much more beneficial and simpler. Those who have income of Rs 15 lakh and above, one needs to invest now Rs 3.75 lakh, or have deductions of the same amount. There is no HRA and the related implication in the new regime.

At least 70 plus deductions and exemptions are there in the old regime. Do you think taxpayers would give it up?

There is simple maths. If a person has an income of Rs 9 lakh, he needs to invest or have a deduction of Rs 2.6 lakh to Rs 5 lakh out of the total income.

How many will be able to spare Rs 2.6 lakh-Rs 5 lakh as that will make them left with only Rs 5 lakh?

About two-third people are not taking housing loans and those would like to avail the benefits of the scheme. Even if you have taken a housing loan, it would be over in 10 years or maximum 20 years. It can't be there in one's entire productive years.

Plus, flexibility is there in the scheme where you can switch according to their needs.

Do you think there is more scope for rationalisation of personal income tax rates given the corporate tax is much lower?

There will always be and should be differences between the corporate tax rates and personal income tax rates, because the former is subjected to double taxation.

Corporate taxes suffer another tax when it is given out as a dividend. That's not the money in hands of people who can spend, money remains with companies which are actually not distributed. Even globally, the corporate taxes are lower.

IMAGE: Finance Minister Nirmala Sitharaman with Revenue Secretary Sanjay Malhotra at the 60th anniversary of the enactment of the Customs Act at the Dr Ambedkar International Centre in New Delhi, December 14, 2022. Photograph: ANI Photo

Why does the government tighten the TDS norms for the online gaming sector?

The rules have been tightened to curb anti-money laundering practices. There are instances where these so-called online gaming platforms are being used to transfer money in India and overseas. The rule is intended to capture such transactions.

Would the norms be able to track offshore online gaming platforms also?

Money in any case will go through banking channels. Intent is certainly to capture those offshore platforms also. And if required, we will seek RBI intervention to track these transactions.

Why has the limit been hiked to 20 per cent for those using LRS (Liberalised Remittance Scheme)?

This rule is not for medical and education purposes. The limit has been hiked on foreign tours. The expenditure is coming out of taxable income instead of savings. No one uses savings for foreign tour. It is taxable income particularly those who are above Rs 15 lakh income bracket. The move is intended to curb tax avoidance.

TDS default in Virtual Digital Asset transaction or crypto-currency will now attract penalty and prosecution? Could you please elaborate?

TDS provision for VDA has been introduced earlier. This is in continuation with the earlier provision adding the penalty and prosecution in case of default.

Do you think the tax avoidance measures will increase the tax base?

Insurance tax exemption has been plugged by limiting the income tax exemption on the proceeds of high-value life insurance policies; capital gains on market-linked debentures will now be taxed.

House investment exemption restriction of Rs 10 crore, then joint development projects taken up, consideration taken in cash, cheque etc has been plugged and also angel tax.

These moves may not broaden the tax base but will deepen it.

Get Rediff News in your Inbox:
Shrimi Choudhary and Asit Ranjan Mishra in New Delhi
Source: source
 

Moneywiz Live!